- Title
- Uneasy lies the head that wears a crown: Firm network status and market response to negative rumors
- Creator
- Fan, Michelle Xiaomin; Wu, Huiying; Ying, Sammy Xiaoyan; You, Jiaxing
- Relation
- Pacific-Basin Finance Journal Vol. 82, Issue December 2023, no. 102162
- Publisher Link
- http://dx.doi.org/10.1016/j.pacfin.2023.102162
- Publisher
- Elsevier
- Resource Type
- journal article
- Date
- 2023
- Description
- This study investigates whether firm status in networks is a burden in the context of negative rumors. We use a network approach to capture firms' network of affiliations through cross-shareholding and to identify status hierarchies embedded in the relational structure. Using a sample of 1428 negative rumors related to 913 firms during the period 2007–2015, we find that the market responds negatively to negative rumors and that high-status firms suffer more than low-status firms do. Our mechanism tests show that high-status firms attract more attention from the media than low-status firms and that differential media attention plays a mediating role in the relationship between firm status and market response to rumors. In addition, we find that investor sentiment strengthens the status-market response relation. Further analyses show that although high-status firms vigorously deny rumors by rumor clarification announcements, their denial strategy does not function as intended. These results provide robust evidence that status is a burden when encountering negative rumors and that media play an essential role in facilitating the relationship between firm status and market reaction to negative rumors.
- Subject
- firm status; rumor; media; market reaction
- Identifier
- http://hdl.handle.net/1959.13/1496835
- Identifier
- uon:54250
- Identifier
- ISSN:0927-538X
- Language
- eng
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